Rebalanced the entire portfolio yesterday as it had drifted higher than bands allowed toward equities. 17% of stocks in international, 60/40 stocks to bonds 2 years into retirement. Zero international bonds. International stocks 8.23% of portfolio.

I’m at 70:30 because my overwhelmingly dominant stock investment is the CREF Stock account in my 403b plan at TIAA. It has that ratio. I’ve never considered worth the trouble to change it by switching to separate funds for domestic and international.

Years of reading the forum led me to gradually nudge my allocation within stocks from 20% international up to about 25% international, over a time period of about a decade. Yes--led me to engage in bad market timing, because I upped the allocation just as international stocks entered a period of underperformance. Oh, well.

When I started, I had accidentally let my stock allocation be 20.4% international because I'd ignored an international stock allocation in one of my mutual funds, and Vanguard's portfolio analysis tool dinged me for having too much international (they had programmed in 20% as a maximum). Then for many year it would ding me if my allocation ever fell below 20%. The former recommended maximum had become the recommended minimum. I think currently it is dinging me for having less than 30%.

I hate that.

Good, bad, or indifferent, I know of nothing objective or rational that would lead anyone to have a significantly different allocation today than they would have had in, say, 1990. Whatever made sense then still makes sense now. Reasons that are sometimes given are transparently rationalizations, not objective rationales.

Years of reading the forum led me to gradually nudge my allocation within stocks from 20% international up to about 25% international, over a time period of about a decade.

When I started, I had accidentally let my stock allocation be 20.4% international because I'd ignored an international stock allocation in one of my mutual funds, and Vanguard's portfolio analysis tool dinged me for having too much international (they had programmed in 20% as a maximum). Then for many year it would ding me if my allocation ever fell below 20%. The former recommended maximum had become the recommended minimum. I think currently it is dinging me for having less than 30%.

I hate that.

Good, bad, or indifferent, I know of nothing objective or rational that would lead anyone to have a significantly different allocation today than they would have had in, say, 1990. Whatever made sense then still makes sense now. Reasons that are sometimes given are transparently rationalizations, not objective rationales.

Sure there are rational reasons. As an example, I was not alive in 1990.

To the OP: I am market weight US/international.

"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Good, bad, or indifferent, I know of nothing objective or rational that would lead anyone to have a significantly different allocation today than they would have had in, say, 1990. Whatever made sense then still makes sense now. Reasons that are sometimes given are transparently rationalizations, not objective rationales.

1990 is an interesting year to pick given that the US market cap was much lower than it is now (closer to 30%). Of course this was due to the Japanese market going bananas but certainly if one's objective was to have a market cap weight of international, then the rational thing to do from 1990 to today would be to decrease international exposure from ~70% to ~50% correct? 20% seems like a significant difference to me.

Yes I have home country bias. But when your home country happens to have the world's strongest economy and infrastructure, that is okay. I am a relatively new boglehead and have read many of the arguments for and against international. I respect those who feel the need to diversify with international, but for me personally, living in the US, I don't think it is necessary. I'd rather keep it simple with one stock fund VTSAX and honestly it helps me sleep better at night not worrying too much about what is going on across the ponds and how it will affect my investments. One country is enough to worry about as it is.

Only time will tell if having no international will be better or not. But as has been mentioned before, it probably will not make much difference in the end, as long as we all keep our costs low and stay the course.

This community is heavily divided on the proper international/US split. The horse has been beat so much, its become glue. I've learned to let the markets dictate this type of thing and hold everything at market weights. Currently thats about 50/50 US/World.

Yes I have home country bias. But when your home country happens to have the world's strongest economy and infrastructure, that is okay. I am a relatively new boglehead and have read many of the arguments for and against international. I respect those who feel the need to diversify with international, but for me personally, living in the US, I don't think it is necessary. I'd rather keep it simple with one stock fund VTSAX and honestly it helps me sleep better at night not worrying too much about what is going on across the ponds and how it will affect my investments. One country is enough to worry about as it is.

Only time will tell if having no international will be better or not. But as has been mentioned before, it probably will not make much difference in the end, as long as we all keep our costs low and stay the course.

+1

Well said. It has been over 23 years for me without international. In the long term it really will not be a deal breaker, but keeping costs low and stay the course will.

Last edited by stemikger on Sat Jan 20, 2018 4:21 pm, edited 1 time in total.

All U.S. Portfolio! I followed Jack's advice and get my international through the S&P or Total Market Index. The accidental tourist if you will.

I disagree with Jack on this one. What your are missing is international companies selling into US markets. Think Nestle, UniLever, Diageo, Samsung , Intercontinental Hotels and many other products most US consumers use.

Just curious how other Bogleheads have their U.S.:International ratio set up. I'm currently at 2:1 but I'm tempted to cap weight and go 1:1. After all, if I believe in cap weighting my U.S. equities, why not cap weight my global equities as well?

The poll results have two entries for 60:40, and my brain doesn't like it.

However, as 100% of my equity investments lie solely in Total Stock Market Index Funds, I do care about how Total U.S. Stock Market Index Funds perform versus Total International Stock Market Index Funds.

Let's take a look at past performance over the past 20 years of each fund:

The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSMX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VGTSX) was 4/29/1996.

Per Morningstar, as of 1/19/2018, if you had invested $10,000 in both funds on 4/29/1996, you would currently have $64,465 in your Total Stock U.S. Stock Market Index Fund, which would be more than double as much as the $31,221 in your Total International Stock Index Fund.

Of course, past performance does not indicate future performance.

Best,
oldzey

"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

Going back further shows a less-clear picture. Comparing (blue) Vanguard International Growth, VWIGX, (an active fund, and hardly index based, but one of the oldest international funds that I could find), and the (yellow) Vanguard 500 Index (VFINX) shows that from 1981 through 1996 International was ahead. After that the S&P took over until they tied roughly from 2007 to 2011.

My target is to follow the allocations of the MSCI ACWI index - so roughly 50% US / 40% Intl / 10% EM.

I am investing mostly through ITOT & VXUS which both pretty much cover the full equity market. However, there is an allocation to international through OAKIX (about 15% of the EQ portfolio) which may tilt things slightly depending on how they are invested however.

But what makes you claim your home country has the world's strongest economy and infrastructure? Many countries are experiencing stronger growth even if they have (for now) smaller economies. Many have better infrastructure it seems to me.

And as for noting that one country is enough to worry about -- might you not prefer to worry about no countries because you are diversified? Just as you don't worry about any single stock because you own the market?

I'm a US citizen and resident, btw. But I travel to Africa, Asia, and Europe about 30% of my time for work and holiday. I"m amazed at how diminished US companies' presence is in Africa and Asia in particular from even 10 years ago.

Yes I have home country bias. But when your home country happens to have the world's strongest economy and infrastructure, that is okay. I am a relatively new boglehead and have read many of the arguments for and against international. I respect those who feel the need to diversify with international, but for me personally, living in the US, I don't think it is necessary. I'd rather keep it simple with one stock fund VTSAX and honestly it helps me sleep better at night not worrying too much about what is going on across the ponds and how it will affect my investments. One country is enough to worry about as it is.

Only time will tell if having no international will be better or not. But as has been mentioned before, it probably will not make much difference in the end, as long as we all keep our costs low and stay the course.

But what makes you claim your home country has the world's strongest economy and infrastructure? Many countries are experiencing stronger growth even if they have (for now) smaller economies. Many have better infrastructure it seems to me.

And as for noting that one country is enough to worry about -- might you not prefer to worry about no countries because you are diversified? Just as you don't worry about any single stock because you own the market?

I'm a US citizen and resident, btw. But I travel to Africa, Asia, and Europe about 30% of my time for work and holiday. I"m amazed at how diminished US companies' presence is in Africa and Asia in particular from even 10 years ago.

True, this could be debated. But I think most people would agree the US has the strongest economy and infrastructure. That is why about 50% of the world market weight is in the US alone. No other country even comes close. I firmly believe that America still is the land of opportunity and prosperity that it has been known for. Call me naive or biased or nationalistic, but I am happy to live here and invest my money it its economy.

I see your point about not worrying about a single stock and so we diversify. Fair enough. However, the analogy is not a complete one to one since neither the total stock market index nor the international one deviates as much as a single stock may on a given single day. Both indices experience gradual changes while single stocks tend to make huge jumps. I simply have decided that the US market is enough diversification for me to achieve my goals. If others want international that is okay. I even recommend international to my friends without hesitation. Like I said before. It probably won't make much difference in the end, that is, as long as we keep our costs low and stay the course.

All U.S. Portfolio! I followed Jack's advice and get my international through the S&P or Total Market Index. The accidental tourist if you will.

I disagree with Jack on this one. What your are missing is international companies selling into US markets. Think Nestle, UniLever, Diageo, Samsung , Intercontinental Hotels and many other products most US consumers use.

So why would that make a difference. We spend our money in U.S. dollars and what about currency risk? After all is said and done, I don't see international doing better in the long term. They simply do not have the same set of rules and regulations when it comes to investing for the average person. The U.S. is the safest place to keep your money due to those rules, market risk is enough. Why take on sovereign risk and currency risk.

The S&P and Total Market derive something like 50% of their profits from overseas, so I already see myself as an international investor without taking on the added risk I mentioned above.

In the end of I am practicing home country bias, so be it. It is what keeps me Staying the Course and in the long run that will be what determines whether I am going to retire with dignity. It has been over 23 years without investing in international, quite frankly I will not comfortable doing it at this point. For the record, I am 53.

Last edited by stemikger on Sun Jan 21, 2018 7:28 am, edited 1 time in total.

On a side note, I love how Bogleheads are such independent thinkers (which is a good thing).

They even disagree with the our leader! I have no problem with disagreeing with Jack, but IMHO the chapter in Common Sense on Mutual Funds on international investing just makes so much sense that all the arguments against it, don't make as much sense for me. Not that it matters, but so far Jack's advice has worked out wonderful for the past 23 years. 'It may not in the future but the main reason why I invest the way I do is because it enables me to stay the course.

Large Japanese companies in the 80's and 90's made a lot of money selling to the U.S., Europe, and the rest of the world. But that didn't mean that investors in the Japanese stock market were getting meaningful international diversification from owning those companies. Japanese investors with a home country bias paid the price.

I couldn't sleep at night with a 100% U.S. portfolio, at least not unless I significantly lowered my allocation to equities. Whether it's an illusion or not, I feel safer spreading my investments around the world, even with investments that, in isolation, might seem riskier (emerging markets and ex-US small caps).